Oct. 14 (Bloomberg) -- Kislay Kanth, head of research at MAPE Securities Pvt., comments on India’s inflation and interest rates. He spoke in a phone interview from Mumbai.
The benchmark wholesale-price index rose 9.72 percent from a year earlier after a 9.78 percent jump in August, the government said in a statement today. The median of 21 estimates in a Bloomberg News survey was for a 9.75 percent increase.
“Unless inflation is visibly lower, maybe around 8.5 percent, the central bank won’t be pausing on interest rate increases.
‘‘Weekly food inflation data or monthly data is not showing any respite. We could have a situation where monetary tightening continues for the rest of the year.
‘‘It may become unsustainable for the economy because most banks haven’t passed on the previous rate increases. The central bank would be looking at that aspect as well.
‘‘Giving another 50 basis-point increase, when the previous rate increases have not achieved the objective, will not serve any purpose. The central bank should increase rates by 25 basis points and persuade banks to pass it on.
‘‘The root cause of our inflation is government spending, which is not helping in creating capital. The spending is more of consumption.’’
--Editor: Abhay Singh
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